Notes 

 
1. Please “​BOLD​” the relevant portions of the case. 
2. Please be concise. If you wish to put a longer digest, follow #1 and be sure that it may stand on 
its own without the other parts.  
2. After pasting your digest here in the google document, be sure to use the “Comic Sans MS” font 
and size of 10 so the document will be in uniform. 
3. Please include the name, gr no. date of the case, who made the digest and number of your digest 
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4. Follow the syllabus structure, for example below 
 
Transportations in General 
a. Relationship to a Public Utility (​ABUYUAN) 
b. Nature of a Franchise (​BERNARDO​) 
 
Raymundo v Luneta 
Cogeo-Cubao Operator and Driver’s Association v CA 
 
And so forth… 
 
God Bless and Good Luck!  

---- ​START HERE​ ---- 

D. Accidents and Damages in Maritime Commerce 
1. Averages 
(a) Nature and Kinds, Arts. 806 to 808 
(1) Simple or Particular 
(a) Defined, Art. 809 
(b) Efects, Art.810 
(2) Gross or General 
(a) Defined, Arts. 811, 817,818 
(b) Essential Requisites, Arts. 813, 814,860 
  
#1 Magsaysay Inc. v. Agan. 96 Phil 504 (FULLEROS) 
  
(c) Effects, Art. 812 
(d) Jettison, Arts. 815, 816 
(e) Jason Clauses (See York-Antwerp Rules, Rule D) 
  
2 Arrival Under Stress 
(a) Causes, Arts. 819 and 820 
(b) Formalities, Arts. 819, 822 
(c) Expenses, Arts. 821, 822 
(d) Responsibility of Captain, Arts. 823-825 
  
3 Collisions 
(a) Classes and Effects 
(1) Fortuitous, Arts. 830, 832 
(2) Culpable, Arts. 826, 827 and 831 
(3) Inscrutable Fault, Art 828 
  
#2 G Urrutia & Co.v. Baco River Plantation Co, G.R. No. 7675, March 25, 1913 (GALLEGO) 
#3 Government v. Philippine Streamship Co, Inc. G.R. No. 18957, January 16,1923 
(LEONOR) 
 
Facts:  
In this action the Government of the Philippine Islands seeks to recover the sum of 
P14,648.25, the alleged value of 911 sacks of rice which were lost at sea on February 11, 1920, 
as a result of a collision between the steamer ​Antipolo​, owned by the defendant company, and 
the vessel I
​ sabel​, upon which said rice was embarked. In the Court of First Instance judgment 
was entered for the recovery by the plaintiff from the Philippine Steamship Company, Inc., of 
the full amount claimed, with interest from the date of the filing of the complaint. From this 
judgment said company appealed​.
Issue:
Whether or not both vessels were negligent.

Held:
Yes.
The trial judge committed no error in holding that both vessels were to blame and in applying 
article 827 of the Code of Commerce to the situation before him. It is there declared that 
where both vessels are to blame, both shall be solidarily responsible for the damage occasioned 
to their cargoes. As the ​Isabel​ was a total loss and cannot sustain any part of this liability, the 
burden of responding to the Government of the Philippine Islands, as owner of the rice 
embarked on the ​Isabel​, must fall wholly upon the owner of the other ship, that is, upon the 
defendant, the Philippine Steamship Company, Inc.  

Only  one  observation  will  be  added,  in  response  to  one  of  the  contentions  of  the  appellant's 
attorneys,  which  is,  that  the  application  of  article 827 of the Code of Commerce is not limited 
by  article  828  to  the  case  where  it  cannot  be  determined  which  of  the  two  vessels  was  the 
cause  of  the  collision.  On  the  contrary  article  828  must  be  considered  as  an  extension  of 
article  combined  the  rule  of  liability  announced  in  article 827 is applicable not only to the case 
where  both  vessels  may  be  shown  to  be  actually  blameworthy  but  also  to  the  case  where  it  is 
obvious that only one was at fault but the proof does not show which. 

 
 
#4 Smith Bell and Company v. Court of Appeals, supra (MACAPAAR) ​For review 

SMITH BELL AND COMPANY (PHILIPPINES), INC. and TOKYO MARINE AND FIRE 
INSURANCE CO., INC. vs. THE COURT OF APPEALS and CARLOS A. GO THONG AND CO. 
G. R. No. L-56294 May 20, 1991 

FACTS:  ​M/V  “​Don  Carlos​,”  an  inter-island  vessel  owned  and  operated  by  private  respondent  Go 
Thong  was  sailing  south  bound  for  Cebu,  when  it  collided  with  M/S “​Yotai Maru​,” a merchant vessel 
of Japanese registry which was approaching the port of Manila coming in from Kobe, Japan. The bow 
of  the  “​Don  Carlos​”  rammed  the  left  side of the “​Yotai Maru​” inflicting a gaping hole through which 
seawater  rushed in and flooded the hatch, damaging all the cargo stowed therein. The consignees of 
the  damaged  cargo  having  been  paid  by  their  insurance  companies,  the  latter  in  turn  commenced 
actions  against  private  respondent  Go  Thong  for  damages  sustained  by  the  various  shipments.  2 
cases  were  filed  before  the  RTC.  The  first  case  (Smith  Bell  and  Sumitomo  Insurance  v. Go Thong) 
reached  the  SC  which  ruled  in  finality  that  negligence  was  with  the  officers  and  crew  of  “Don 
Carlos.” On the contrary, the second case (Smith Bell and Tokyo Insurance v. Go Thong) was decided 
by  the  CA  holding  the  officers  and crew of “Yotai Maru” at fault in the collision. Hence the present 
petition. 
ISSUE: ​Whether or not inscrutable fault is present in said collision. 

RULING​:  NO.  The  Court  believes  that  there  are  three  (3)  principal  factors  which  are constitutive 
of  negligence  on  the  part  of  the  “​Don  Carlos​,”  which  negligence  was  the  proximate  cause  of  the 
collision. 

(1)  The  first  of  these  factors  was  the  failure  of  the  “Don  Carlos” to comply with the requirements 
of  Rule  18  (a)  of  the  International  Rules  of  the  Road  which  provides  as  follows:  (a)  When  two 
power-driven  vessels  are  meeting  end  on,  or  nearly  end  on,  so  as  to  involve  risk  of  collision,  each 
shall  alter  her  course  to  starboard,  so  that  each  may  pass  on  the  port  side  of  the  other.  The 
evidence  on  this  factor  state  that  “Don  Carlos”  altered  its  course  by  five  degrees  to  the  left 
instead  of  to  the  right  which  maneuver  was  the  error  that  caused  the  collision  in  question.  Why it 
did  so  is  because  “Don  Carlos”  was  overtaking  another  vessel,  the  “Don  Francisco”,  and was then at 
the  right  side  of  the  aforesaid  vessel.  It  was  in  the  process  of  overtaking  “Don  Francisco”  that 
“Don  Carlos”  was  finally  brought  into  a  situation  where  he  was  meeting  end-on  or  nearly  end-on 
“Yotai Maru, thus involving risk of collision. 

(2)  The  second  circumstance  constitutive  of  negligence  on  the  part  of  the  “​Don  Carlos​”  was  its 
failure  to  have  on  board  that  night  a  “proper  look-out”  as  required  by  Rule  I  (B)  Under  Rule  29  of 
the  same  set  of  Rules,  all  consequences  arising  from  the  failure  of  the  “​Don  Carlos​”  to  keep  a 
“proper  look-out”  must  be  borne  by  the  “​Don  Carlos​.”  In  the  case  at  bar,  the  failure  of  the  “​Don 
Carlos​”  to  recognize  in  a  timely  manner  the  risk  of  collision  with  the  “​Yotai  Maru​”  coming  in  from 
the  opposite  direction,  was  at  least  in  part  due  to  the  failure  of  the  “​Don  Carlos​”  to  maintain  a 
proper look-out. 

(3)  The  third  factor  constitutive  of  negligence  on  the  part  of  the  “​Don  Carlos​”  relates to the fact 
that  Second  Mate  Benito  German  was,  immediately  before  and  during  the  collision,  in  command  of 
the  “​Don  Carlos​.”  Second  Mate  German  simply  did  not  have  the  level  of  experience,  judgment  and 
skill  essential  for  recognizing  and  coping  with  the  risk  of  collision  as  it  presented  itself  that  early 
morning  when  the  “​Don  Carlos​,”  running  at  maximum  speed  and  having  just  overtaken  the  “Don 
Francisco”  then  approximately  one  mile  behind  to  the  right  side  of  the  “​Don  Carlos​,”  found  itself 
head-on  or  nearly  head  on  ​vis-a-vis  t​ he  “​Yotai  Maru. ”​  It is essential to point out that this situation 
was created by the “​Don Carlos​” itself. 

The CA Decision is REVERSED and SET ASIDE. 

NOTE:  Inscrutable  Fault  –  ​where  it  cannot  be  determined  which  of  the  2  vessels  caused  the 
collision,  each  vessel  shall  suffer  its  own  damages,  and  both  shall  be  solidarily  responsible  for  the 
losses and damages occasioned to their cargoes. 

  
4. Shipwrecks, Arts. 840 to 843 
(a) Salvage Law (Act No. 2616) 
  
#5 G. Urrutia &Company v. The Pasig Steamer and Lighter Co. G.R. No, 7294, March 22, 
1912 (MONCADA) 
#6 Erlanger& Galinger v. Swedish East Asiatic Co. Ltd, 34 Phil 178 (PELAYO) 
#7 Atlantic, Gulf& Pacific Company v Uchida Kisen Kaisha, G.R No. L-15871, November 7, 
1921 (also for admiralty or maritime commerce (RAMORAN) 
#8 Barrios v. Go Thong, 7SCRA 535 (REY) 
  
E. Special Contracts of Maritime Commerce 
1. Charter Parties 
a. Definition 
b. Kinds 
  
#9 Planters Products v. CA, supra (SANTOS) 
#10 Coastwise Lighterage Corp. v. CA, 245 SCRA 796 (TULIAO) 
 
#11 Caltex Philippines v. Sulpicio Lines, 315 SCRA 709 (USON) 
G.R. No. 131166 September 30, 1999 

Facts:  ​On  December  19,  1987,  the  passenger  ship  MV  Doa  Paz,  owned  and  operated  by  Sulpicio 
Lines  bound  for  Manila  collided  with  motor  tanker  MT  Vector.  MT  Vector  carried  on  board  oil 
products  owned  by  Caltex  by  virtue  of  a  charter  contract.  Numerous  people  died  in  that  accident 
including  public  school  teacher  Sebastian  Caezal  and  his  11  year  old  daughter.  The  ship  carried  an 
estimated  4,000 passengers; many indeed, were not in the passenger manifest. Only 24 survived the 
tragedy.  
 
In  1989,  Caezals  wife  and  mother  filed  a  complaint  for  Damages  arising  from  Breach  of 
Contract  of  Carriage  against  Sulpicio  Lines, Inc. Sulpicio Lines, in turn, filed a third party complaint 
against Vector Shipping, Inc. and Caltex Phils.  
 
The  trial  court  rendered  a  decision  against  Sulpicio  Lines  and  dismissed  the  third-party 
complaint.  On  appeal,  the  Court  of  Appeals  modified  the  trial  court's  ruling  and  held  Vector 
Shipping Co. and Caltex Phils., Inc., equally liable. Hence, this petition. 
 
Issues: 
1. Whether or not the charterer have liability for damages. 
2. Whether or not MT Vector is a common carrier.  
3.Whether or not Caltex is liable for damages under the Civil Code. 
 
Ruling: 
 1.  No.  The  charterer  has  no  liability  for  damages  under  Philippine  Maritime  laws.  Rights  & 
duties  between  the  shipper  and  carrier  depends  if  the  contract  of  carriage  is  a  bill  of  lading  or 
equivalent  shipping  documents  or  charter  party  or  similar  contract and not if the carrier is a public 
or private carrier.  
 
In  this  case,  Caltex  and  Vector  entered  into  a  contract  of  affreightment,  also  known  as  a 
voyage charter. 
 
Hence,  if  the  charter  is  a  contract  of  affreightment,  which  leaves  the  general  owner  in 
possession  of  the  ship  as  owner  for  the voyage, the rights and responsibilities of ownership rest on 
the owner. The charterer is free from liability to third persons in respect of the ship.  
 
2.  Yes.  The  charter  party  agreement  did  not  convert  the  common  carrier  into  a  private 
carrier.  The  parties  entered  into  a  voyage  charter,  which  retains  the  character  of  the  vessel  as  a 
common  carrier.  It  is  imperative  that  a  public  carrier  shall  remain  as  such,  notwithstanding  the 
charter  of  the  whole  or  portion  of  a  vessel  by  one or more persons, provided the charter is limited 
to the ship only, as in the case of a time-charter or voyage charter.  
 
It  is  only when the charter includes both the vessel and its crew, as in a bareboat or demise 
that  a  common  carrier  becomes  private,  at  least  insofar  as  the  particular  voyage  covering  the 
charter-party  is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession 
and  control  of  the  ship,  although  her  holds may, for the moment, be the property of the charterer. 
A  common  carrier  is  a  person  or  corporation  whose  regular  business  is  to  carry  passengers  or 
property  for  all  persons  who  may  choose  to  employ  and  to  remunerate  him.  MT  Vector  fits  the 
definition of a common carrier under Article 1732 of the Civil Code. 
 
The  public  must  of  necessity  rely  on  the  care  and  skill  of  common  carriers  in  the  vigilance 
over  the  goods  and  safety  of  the  passengers,  especially  because  with  the  modern  development  of 
science  and  invention,  transportation  has  become  more  rapid,  more  complicated  and  somehow  more 
hazardous.  For  these reasons, a passenger or a shipper of goods is under no obligation to conduct an 
inspection  of  the  ship  and  its  crew,  the  carrier  being  obliged  by  law  to  impliedly  warrant  its 
seaworthiness. 
 
3.  No.  The  charterer  of  a  vessel  has  no  obligation  before  transporting  its  cargo  to  ensure 
that  the  vessel  it  chartered  complied  with  all  legal  requirements.  The  duty  rests  upon the common 
carrier simply for being engaged in "public service."  
 
The  relationship between the parties in this case is governed by special laws. Because of the 
implied  warranty  of  seaworthiness,  shippers  of  goods,  when  transacting  with  common  carriers,  are 
not  expected  to  inquire  into  the  vessel’s  seaworthiness,  genuineness  of  its  licenses  and  compliance 
with all maritime laws.  
To  demand  more  from  shippers  and  hold  them  liable  in  case  of  failure  exhibits  nothing  but  the 
futility of our maritime laws insofar as the protection of the public in general is concerned.  
 
Such  a  practice  would  be  an  absurdity  in  a  business  where  time  is  always  of  the  essence. 
Considering  the  nature  of  transportation  business,  passengers  and  shippers  alike  customarily 
presume  that  common  carriers  possess  all  the  legal  requisites  in its operation. Caltex had the right 
to  presume  that  the  ship  was  seaworthy  as  even  the  Philippine  Coast  Guard itself was convinced of 
its seaworthiness. 
 
  
2. Loans on Bottomry and Respondentia 
a. Loan on Bottomry, defined 
b. Loan on Respondentia, defined 
c. Character of Loan, Art 719 
  
F. Bill of Lading 
1. Contents, Art. 706, 707,713, 714 
2. Probative Value, Arts. 709, 710 
  
#12 Magellan Manufacturing Marketing Corporation v. Court of Appeals, et al., 201 SCRA 
102 (VALENZUELA) 
 
 
 
 
#13 Nedlloyd Lijnen v. Glow Laks Enterprises, supru (ABUYUAN) 
FACTS:  
On or about September 14, 1987, respondent loaded on board M/V Scandutch at the Port of Manila 
a total of 343 cartons of garments, complete and in good order for pre-carriage to the Port of 
Hongkong. The goods covered by Bill of Lading Nos. MHONX-2 and MHONX-3 arrived in good 
condition in Hongkong and was transferred to M/S Amethyst for final carriage to Colon, Free Zone, 
Panama. Both vessels, M/S Scandutch and M/S Amethyst, are owned by Nedlloyd represented in 
the Philippines by its agent, East Asiatic. The goods, which were valued at US$53,640.00, were 
agreed to be released to the consignee, Pierre Kasem, International, S.A., upon presentation of the 
original copies of the covering of the bills of lading. Upon arrival of the vessel at the Port of Colon 
on October 23,1987, petitioners purportedly notified the consignee of the arrival of the shipments, 
and its custody was turned over to the National Ports Authority in accordance with the laws, 
customs, regulations, and practice of trade in Panama. By an unfortunate turn of events, however, 
unauthorized persons managed to forge the covering bills of lading, and on the basis of the falsified 
documents, the ports authority released the goods. 
On July 16, 1988, respondent filed a formal claim with Nedlloyd for the recovery of the 
amount of US$53,640 representing the invoice value of the shipment but to no avail. Claiming that 
petitioners are liable for the misdelivery of the goods, respondent initiated Civil Case No. 88-45595 
before the Regional Trial Court (RTC) of Manila, Branch 52, seeking for the recovery of the amount 
of US$53,640, including the legal interest from the date of the first demand. In disclaiming 
liability for the misdelivery of the shipments, petitioners asserted in their Answer that they were 
never remiss in their obligation as a common carrier and the goods were discharged in good order 
and condition into the custody of the National Port Authority of Panama in accordance with the 
Panamanian Law. They averred that they cannot be faulted for the release of the goods to 
unauthorized persons, their extraordinary responsibility as a common carrier having ceased at the 
time the possession of the goods were turned over to the possession of the port authorities. On 
April 29,2004, the RTC rendered a Decision, ordering the dismissal of the complaint but granted 
petitioners’ counterclaims. In effect, respondent was directed to pay petitioners the amount of 
PI20,000 as indemnification for the litigation expenses incurred by the latter. In releasing the 
common carrier from liability for the misdelivery of the goods, the RTC ruled that Panama Law was 
duly proven during the trial and pursuant to the said statute, carriers of goods destined to any 
Panama port of entry have to discharge their loads into the custody of Panama Ports Authority to 
make effective government collection of port dues, customs duties and taxes. The subsequent 
withdrawal effected by unauthorized persons on the strength of falsified bills of lading does not 
constitute misdelivery arising from the fault of the common carrier. 
On appeal, the Court of Appeals reversed the findings of the RTC and held that foreign laws 
were not proven in the manner provided by Section 24, Rule 132 of the Revised Rules of Court, and 
therefore, it cannot be given full faith and credit. For failure to prove the foreign law and custom, 
it is presumed that foreign laws are the same as our local or domestic or internal law under the 
doctrine of processual presumption. Under the New Civil Code, the discharge of the goods into the 
custody of the ports authority therefore does not relieve the common carrier from liability 
because the extraordinary responsibility of the common carriers lasts until actual or constructive 
delivery of the cargoes to the consignee or to the person who has the right to receive them. Absent 
any proof that the notify party or the consignee was informed of the arrival of the goods, the 
appellate court held that the extraordinary responsibility of common carriers remains. Accordingly, 
the Court of Appeals directed the petitioners to pay respondent the value of the misdelivered 
goods in the amount of US$53,640. 
 
ISSUE:  
Whether or not petitioners are liable for the misdelivery of goods under Philippine law. 
 
HELD: 
 Yes. The Court ruled that petitioners are liable for the misdelivery of goods under Philippine 
law. 
Under the rules of private international law, a foreign law must be properly pleaded and 
proved as a fact. In the absence of pleading and proof, the laws of the foreign country or state will 
be presumed to be the same as our local or domestic law. This is known as processual presumption. 
While the foreign law was properly pleaded in the case at bar, it was, however, proven not in the 
manner provided by Section 24, Rule 132 of the Revised Rules of Court. The decision of the RTC, 
which proceeds from a disregard of specific rules, cannot be recognized. 
It is explicitly required by Section 24, Rule 132 of the Revised Rules of Court that a copy of 
the statute must be accompanied by a certificate of the officer who has legal custody of the 
records, and a certificate made by the secretary of the embassy or legation, consul general, consul, 
vice consular, or by any officer in the foreign service of the Philippines stationed in the foreign 
country, and authenticated by the seal of his office. The latter requirement is not merely a 
technicality but is intended to justify the giving of full faith and credit to the genuineness of the 
document in a foreign country. Certainly, the deposition of Mr. Enrique Cajigas, a maritime law 
practitioner in the Republic of Panama, before the Philippine Consulate in Panama, is not the 
certificate contemplated by law. At best, the deposition can be considered as an opinion of an 
expert witness who possess the required special knowledge on the Panamanian laws but could not be 
recognized as proof of a foreign law, the deponent not being the custodian of the statute who can 
guarantee the genuineness of the document from a foreign country. To admit the deposition as 
proof of a foreign law is, likewise, a disavowal of the rationale of Section 24, Rule 132 of the 
Revised Rules of Court, which is to ensure authenticity of a foreign law and its existence so as to 
justify its import and legal consequence on the event or transaction in issue. 
Article 1736. The extraordinary responsibility of the common carrier lasts from the time 
the goods are unconditionally placed in the possession of, and received by the carrier for 
transportation until the same are delivered, actually or constructively, by the carrier to the 
consignee, or to the person who has the right to receive them, without prejudice to the provisions 
of Article 1738. 
Article 1738. The extraordinary liability of the common carrier continues to be operative 
even during the time the goods are stored in a warehouse of the carrier at the place of destination, 
until the consignee has been advised of the arrival of the goods and has had reasonable opportunity 
thereafter to remove them or otherwise dispose of them. 
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary 
responsibility of the common carrier begins from the time the goods are delivered to the carrier. 
This responsibility remains in full force and effect even when they are temporarily unloaded or 
stored in transit, unless the shipper or owner exercises the right or stoppage in transitu, and 
terminates only after the lapse of a reasonable time for the acceptance of the goods by the 
consignee or such other person entitled to receive them. In this case, there is no dispute that the 
custody of the goods was never turned over to the consignee or his agent but was lost into the 
hands of unauthorized persons who secured possession thereof on the strength of falsified 
documents. The loss or the misdelivery of the goods in the instant case gave rise to the 
presumption that the common carrier is at fault or negligent. 
A common carrier is presumed to have been negligent if it fails to prove that it exercised 
extraordinary vigilance over the goods it transported. When the goods shipped are either lost or 
arrived in damaged condition, a presumption arises against the carrier of its failure to observe that 
diligence, and there need not be an express finding of negligence to hold it liable. To overcome the 
presumption of negligence, the common carrier must establish, by adequate proof, that it exercised 
extraordinary diligence over the goods. It must do more than merely show that some other party 
could be responsible for the damage. 
 
 
#14 Designer Baskets Inc. v Air Sea Transport Inc., G.R. No. 184513, 09 March 2016 
(ALCANTARA) 
 
DESIGNER BASKETS, INC., ​Petitioner​, ​v.​ AIR SEA TRANSPORT, INC. AND ASIA
CARGO CONTAINER LINES, INC., ​Respondents.​

The general rule is that upon receipt of the goods, the consignee surrenders the bill of lading to the carrier and
their respective obligations are considered canceled. Article 353 of the Code of Commerce, however, provides two
exceptions where the goods may be released without the surrender of the bill of lading because the consignee can
no longer return it. These exceptions are when the bill of lading gets lost or for other cause. In either case, the
consignee must issue a receipt to the carrier upon the release of the goods. Such receipt shall produce the same
effect as the surrender of the bill of lading.

Here, the buyer could not produce the bill of lading covering the shipment not because it was lost, but for another
cause: the bill of lading was retained by the seller pending buyer's full payment of the shipment. Buyer and carrier
then entered into an Indemnity Agreement, wherein the former asked the latter to release the shipment even
without the surrender of the bill of lading. The execution of this Agreement, and the undisputed fact that the
shipment was released to seller pursuant to it, operates as a receipt in substantial compliance with the last
paragraph of Article 353 of the Code of Commerce.

FACTS:
DBI is a domestic corporation engaged in the production of housewares and handicraft
items for export. Sometime in October 1995, Ambiente, a foreign-based company,
ordered from DBI 223 cartons of assorted wooden items (the “Shipment”). The
Shipment was worth US$12,590.87 and payable through telegraphic transfer. Ambiente
designated ACCLI as the forwarding agent that will ship out its order from the
Philippines to the United States (US). ACCLI is a domestic corporation acting as agent
of ASTI, a US based corporation engaged in carrier transport business, in the
Philippines.

On January 7, 1996, DBI delivered the shipment to ACCLI for sea transport from Manila
and delivery to Ambiente at 8306 Wilshire Blvd., Suite 1239, Beverly Hills, California.
To acknowledge receipt and to serve as the contract of sea carriage, ACCLI issued to
DBI triplicate copies of the Bill of Lading. DBI retained possession of the originals of the
bills of lading pending the payment of the goods by Ambiente. ASTI released the
Shipment to Ambiente on the strength of an Indemnity Agreement executed in its
favor.

DBI then made several demands to Ambiente for the payment of the shipment, but to
no avail. Thus, on October 7, 1996, DBI filed the Original Complaint against Ambiente,
ACCLI and ASTI for the payment of the value of the Shipment, damages and legal fees.
ASTI, ACCLI and its directors and incorporators filed a motion to dismiss. They argued
that: (a) they are not the real parties-in-interest in the action because the cargo was
delivered and accepted by Ambiente. The case, therefore, was a simple case of non-
payment of the buyer; (b) relative to the incorporators-stockholders of ACCLI, piercing
the corporate veil is misplaced; (c) contrary to the allegation of DBI, the bill of lading
covering the shipment does not contain a proviso exposing ASTI to liability in case the
shipment is released without the surrender of the bill of lading; and (d) the Original
Complaint did not attach a certificate of non-forum shopping.

DBI opposed the said motion, asserting that ASTI and ACCLI failed to exercise the
required extraordinary diligence when they allowed the cargoes to be withdrawn by the
consignee without the surrender of the original bill of lading. ASTI, ACCLI, and ACCLI’s
incorporators-stockholders countered that it is DBI who failed to exercise extraordinary
diligence in protecting its own interest.

They averred that whether or not the buyer-consignee pays the seller is already outside
of their concern. Before the case was resolved by the lower court, DBI impleaded
Ambiente as additional party defendant. The RTC found ASTI, ACCLI and its
incorporators solidarily liable with Ambiente. The incorporators were, however,
absolved from liability. The CA affirmed that Ambiente is liable but absolved ASTI and
ACCLI. According to the CA, there is nothing in the applicable laws that require the
surrender of bills of lading before the goods may be released to the buyer/consignee.
The CA stressed that DBI failed to present evidence to prove its assertion that the
surrender of the bill of lading upon delivery of the goods is a common mercantile
practice.

As for ASTI, the CA explained that its only obligation as a common carrier was to
deliver the shipment in good condition. It did not include looking beyond the details of
the transaction between the seller and the consignee, or more particularly, ascertaining
the payment of the goods by the buyer Ambiente.

ISSUE: Whether ASTI/ACCLI may be held liable for releasing the Shipment without first
demanding for the surrender of the Bill of Lading.

RULING: NO. A common carrier may release the goods to the consignee even without
the surrender of the bill of lading. Under Article 350 of the Code of Commerce, “the
shipper as well as the carrier of the merchandise or goods may mutually demand that a
bill of lading be made.” A bill of lading, when issued by the carrier to the shipper, is the
legal evidence of the contract of carriage between the former and the latter. It defines
the rights and liabilities of the parties in reference to the contract of carriage. The
stipulations in the bill of lading are valid and binding unless they are contrary to law,
morals, customs, public order or public policy.

Here, ACCLI, as agent of ASTI, issued Bill of Lading No. AC/MLLA601317 to DBI. This
bill of lading governs the rights, obligations and liabilities of DBI and ASTI. DBI claims
that Bill of Lading No. AC/MLLA601317 contains a provision stating that ASTI and ACCLI
are “to release and deliver the cargo/shipment to the consignee, x x x, only after the
original copy or copies of the said Bill of Lading is or are surrendered to them;
otherwise they become liable to [DBI] for the value of the shipment. Quite tellingly,
however, DBI does not point or refer to any specific clause or provision on the bill of
lading supporting this claim. The language of the bill of lading shows no such
requirement. There is no obligation, therefore, on the part of ASTI and ACCLI to release
the goods only upon the surrender of the original bill of lading.

Further, a carrier is allowed by law to release the goods to the consignee even without
the latter’s surrender of the bill of lading. The third paragraph of Article 353 of the Code
of Commerce is enlightening: Article 353. The legal evidence of the contract between
the shipper and the carrier shall be the bills of lading, by the contents of which the
disputes which may arise regarding their execution and performance shall be decided,
no exceptions being admissible other than those of falsity and material error in the
drafting.

After the contract has been complied with, the bill of lading which the carrier has issued
shall be returned to him, and by virtue of the exchange of this title with the thing
transported, the respective obligations and actions shall be considered cancelled, unless
in the same act the claim which the parties may wish to reserve be reduced to writing,
with the exception of that provided for in Article 366.

In case the consignee, upon receiving the goods, cannot return the bill of lading
subscribed by the carrier, because of its loss or any other cause, he must give the latter
a receipt for the goods delivered, this receipt producing the same effects as the return
of the bill of lading.

The general rule is that upon receipt of the goods, the consignee surrenders the bill of
lading to the carrier and their respective obligations are considered canceled. The law,
however, provides two exceptions where the goods may be released without the
surrender of the bill of lading because the consignee can no longer return it. These
exceptions are when the bill of lading gets lost or for other cause. In either case, the
consignee must issue a receipt to the carrier upon the release of the goods. Such
receipt shall produce the same effect as the surrender of the bill of lading. The
nonsurrender of the original bill of lading does not violate the carrier’s duty of
extraordinary diligence over the goods. The surrender of the original bill of lading is not
a condition precedent for a common carrier to be discharged of its contractual
obligation.
  
G. Passenger on Sea Voyage 
1. Nature of Contracts, Art.695 
2 Obligations of Passengers, Arts. 693, 699, 704, 694,700 
3 Rights of Passengers, Arts.697, 698 
  
#15 Sweet Lines v. CA, 121 SCRA 769 (BERNARDO) 
#16 Trans-Asia Shipping v. CA, 254 SCRA 260 (BUENCONSEJO) 
  
H Carriage of Goods by Sea Act (Commonwealth Act No. 65; Public Act. No. 521, 74h US Congress) 
  
#17 Eastern Shipping v. IAC, 150 SCRA 463 (CANENCIA) 
#18 Ang v. American Steamship Agencies, 19 SCRA 123 (CRUZ) 
#19 F.H. Stevens v. Nordeutscher, 6 SCRA 180 (DATAN) 
  
Air Transportation 
  
A. International Air Transportation 
(Unless otherwise indicated, reference is to the Warsaw Convention, 51 
O.G. 5084; Presidential Proclamation No. 201, 51, O.G. 4933 [Oct. 1995] 
1. Constitutionality 
  
#20 Santos v. Northwest, 210 SCRA 256 (DIMAUKOM) 
  
2. When applicable, Art. 1(1), 1(2), 1(3) 
  
#21 Lhuillier v. British Airways, G.R. No 171092, March 15, 2010 (DYSANGCO) 
  
3. Liabilities under the Convention, Aris. 17, 18,19 
  
#22 Northwest v. Cuenca, 14 SCRA 1063 (FULLEROS) 
#23 Alitalia v. IAC, 192 SCRA 10 (GALLEGO) 
  
4. Limitations on Liability, Art. 22 
  
#24 Pan Am v: IAC, 164 SCRA 268 (LEONOR) 
Facts:  
On  May  18,  1978,  plaintiff  Pangan  obtained  from  defendant  Pan  Am's  Manila  Office,  through 
the  Your  Travel  Guide,  an  economy  class  airplane ticket with No. 0269207406324 (Exh. G) for 
passage  from  Manila  to  Guam  on  defendant's  Flight  No.  842  of May 27,1978, upon payment by 
said  plaintiff  of  the  regular  fare.  The  Your  Travel  Guide  is  a tour and travel office owned and 
managed by plaintiffs witness Mila de la Rama.  

On  May  27,  1978,  two  hours  before  departure  time  plaintiff  Pangan  was  at  the  defendant's 
ticket  counter  at  the  Manila  International  Airport  and  presented his ticket and checked in his 
two  luggages,  for  which  he  was  given  baggage  claim  tickets  Nos. 963633 and 963649 (Exhs. H 
and  H-1).  The  two  luggages  contained  the  promotional  and  advertising  materials,  the  clutch 
bags,  barong  tagalog  and  his  personal  belongings.  Subsequently,  Pangan  was  informed  that  his 
name  was  not  in  the  manifest  and  so  he  could  not  take  Flight  No.  842  in  the  economy  class. 
Since  there  was  no  space  in the economy class, plaintiff Pangan took the first class because he 
wanted  to  be  on  time  in  Guam  to  comply  with  his  commitment,  paying  an  additional  sum  of 
$112.00.  

When  plaintiff  Pangan  arrived  in  Guam  on  the  date  of  May  27,  1978,  his  two  luggages  did  not 
arrive  with  his  flight,  as  a  consequence  of  which  his  agreements  with  Slutchnick  and  Quesada 
for  the  exhibition  of  the  films  in  Guam  and  in  the  United  States  were  cancelled  (Exh.  L). 
Thereafter, he filed a written claim (Exh. J) for his missing luggages. 

Issue:  

Whether or not the petitioner has a limited liability.  

Held:  

Yes.  In  the  absence  of  a  showing  that  petitioner's  attention  was  called  to  the  special 
circumstances  requiring  prompt  delivery  of  private  respondent  Pangan's  luggages,  petitioner 
cannot be held liable for the cancellation of private respondents' contracts as it could not have 
foreseen such an eventuality when it accepted the luggages for transit. 

 
  
5. When limitations unavailable, Art 3, 25 
  
#25 TWA v CA, 165 SCRA 143 (MACAPAAR) ​For review 
 
TRANS  WORLD  AIRLINES  vs.  CA  and  ROGELIO  A.  VINLUAN  G.R.  No.  78656;  August  30, 
1988 
 
FACTS:  Rogelio  A.  Vinluan  is  a  practicing  lawyer  who  had  to  travel  to  several  cities  in  Europe  and 
the  U.S.  He  entered  into  a  contract  for  air  carriage  for  valuable  consideration with Japan Airlines 
first  class  from  Manila  to  Tokyo,  Moscow,  Paris,  Hamburg, Zurich, New York, Los Angeles, Honolulu 
and  back  to  Manila.  He  was  issued  first  class  tickets for the entire trip. On April 18, while in Paris, 
he  went  to  the  office  of  Trans  World  Airlines  (TWA)  at  the  De  Gaulle  Airport  and  confirmed 
reservation  for  first  class  accommodation  on  board  its  Flight  No.  41  from  New  York  to  San 
Francisco,  scheduled  to  depart  on  April  20.  It  was  reconfirmed  at  8  a.m.  Vinluan  presented  his 
ticket  for  check-in  at  JFK  International  Airport  at  about  9:45  a.m., the departure being 11:00 a.m. 
He  was  informed  that  there  was  no  first  class  seat  available  for  him.  He  asked  for  an  explanation 
but  TWA  employees  on  duty  declined  to  give  any  reason.  When  he  began  to  protest,  one  of  the 
TWA  employees,  a  certain  Mr.  Braam,  rudely  threatened  him  with the words "Don't argue with me, 
I have a very bad temper." 
 
To  be  able to keep his schedule, Vinluan was compelled to take the economy seat offered to him and 
he  was  issued  a  “refund  application"  as he was downgraded from first class to economy class. While 
waiting  for  the  departure,  Vinluan  noticed  that white Caucasians who had checked-in later than him 
were given preference in some first class seats which became available due to "no show" passengers. 
Vinluan  filed  an  action  for  damages  against  the  TWA  in  CFI  Rizal  alleging  breach  of  contract  and 
bad faith. CFI ruled in favour of Vinluan. CA affirmed. Hence, the petition for review.  
 
ISSUE: ​Whether Vinluan is entitled to moral and exemplary damages. 
 
RULING​:  YES.  Petitioner  claims  that  because of maintenance problems of the aircraft, TWA Flight 
No.  41  was  cancelled  and  a  special  Flight  No. 6041 was organized. A smaller Boeing 707 with only 16 
first  class  seats  was  substituted.  Hence,  passengers  who  had  first  class  reservations  had  to  be 
accommodated  on  a  first-come,  first-served  basis.  The  contention  is  devoid  of  merit.  The 
discrimination  is obvious and the humiliation to which Vinluan was subjected is undeniable. Petitioner 
sacrificed  the  comfort  of  its  first  class  passengers  for  the  sake  of economy. Such inattention and 
lack  of  care  for  the  interest  of  its  passengers  who  are  entitled  to  its  utmost  consideration, 
particularly  as  to  their  convenience,  amount  to  bad faith which entitles the passenger to the award 
of  moral  damages.  Vinluan  was  a  practicing  lawyer,  a  senior  partner  of  a  big  law  firm  in  Manila.  He 
was  a  director  of  several  companies  and  was  active  in  civic  and  social  organizations  in  the 
Philippines.  Considering  the  circumstances  of  this case and his social standing in the community, the 
award of moral (300k) and exemplary damages (200k) by the respondent court is in order 
  
6. Conditions on Imposition of Liability, Art 26, 28, 29 
  
#26 Santos v. Northwest, supra (MONCADA) 
#27 Luna v. Court of Appeals, 216 SCRA 107 (PELAYO) 
#28 PAL v. Savillo, G.R. No 149547, July 4, 2008 (RAMORAN) 
#29 United Airlines v Uy, G.R. No. 127768, November 19, 1999 (REY) 
  
B. Passenger Rights 
  
#30 Joint DOTC-DTI Administrative Order No 01, Series of 2012 (SANTOS) 
#31 Manay, Ir. v Cebu Air Inc. Supra (TULIAO)